I don’t know many entrepreneurs who do somersaults at the thought of pricing their products.
It can be daunting, scary, and uncomfortable to decide what you’re going to ask people to pay for your services. It’s much too easy to turn it into a personal decision based on how you assess your value and worth as an artist rather than making it a business decision based on costs and the financial needs of your company.
That doesn’t mean that accessing the value and worth of your products won’t come into play, but only after you know the hard facts.
The most stable business foundation to build your pricing on is what your company needs to be profitable. Using the Benchmark survey created by Professional Photographers of America, a formula based on a 25-percent cost of sales (COS) factor is where profitability begins. Before we start figuring out what that factor is for your business, we need to decide what products you want to offer.
You obviously offer images. Now, in what format will you sell them? For example:
- Portraits to be hung on walls (11×14 and larger)
- Gift prints (8×10 and smaller)
- Groupings of small images matted and framed together, such as three 5x7s
- Groupings of large images individually framed and hung together, such as three 16×16 images hung side by side over a sofa
- In albums, boxed sets or on greeting cards
- The print media you will offer for any of the above
- Low-res digital image files for social media sharing
- High-res digital image files the client can make prints from
Each of these options has a specific cost and a value, and these are crucial in pricing profitably.
Now that you’ve decided what products you want to offer, let’s figure out your production costs and what it looks like to apply a 25-percent COS factor. Let’s use a 20×30 wall portrait for an example. The costs to your business might look like this:
- Printing: $27.50
- Mount-board: $17.40
- Coating: $3.75
- Retouching (major blemish removal), three faces at $4 per face: $12
- Retouching enhancements (defining the iris and pupil and lightening the white of the eyes),three faces at $5 per face: $15
- Shipping of large print from lab to you: $10
- Packaging for presentation to the client: $3.50
- Total cost: $89.15
- To arrive at a profitable price to charge your client, multiply COS x 4 for a gross margin of 75%: $89.15 x 4 = $356 (I recommend rounding that to the prettier figure of $375.)
Q. Does this formula apply to smaller gift prints?
Yes, thanks to using your sales averages in your pricing formula (and good sense and finesse in your strategy). If you put the cost of an 8×10 print in place of the 20×30 and reduce the shipping fee, you’ll find the costs reduced by only $34, which creates a needed asking price of $220 for an 8×10.
Don’t panic! You don’t have to charge $220 for an 8×10 to stay in business — in fact, that could tank you. But it does shed light on why it’s much easier to be profitable selling wall portraits than gift prints.
Q. So how do I profitably price a gift print?
Sell the client a larger portrait first. Once the client has covered the cost of retouching by purchasing the large portrait, your costs for additional prints of that image drastically drop.
A profitable option to that could be to sell a package of multiple gift prints of a limited number of poses, like five gift prints of two images. Your retouching costs would be capped by limiting the number of images, and you could charge the client a more reasonable price.
Q. How can I profitably price a digital file?
You might assume that selling digital files can be profitable because you remove the lab and shipping costs. However, when you realize that the retouching is the greatest cost of producing your products, you’ll see it becomes a real challenge to price profitably.
The client’s perceived value of the product, a digital file, and what he’s willing to pay for it will not be profitable for your business. You hit the ceiling of what you can charge pretty quickly. Here again, it doesn’t mean that if you offer this product you can’t be profitable. You can if you first get those major costs covered with the sale of a product that is profitable.
Q. How do I price retouching?
Regardless of whether you retouch the image yourself or outsource the task, you need to use the industry standard cost for retouching in your pricing formula. A retouching company charges you a fee to retouch each head in an image, but forget about pricing a family portrait of five a higher price than a family portrait of three.
Instead, base your pricing on the average number of subjects you retouch per image, and that one price will be profitable overall. For most portrait studios, three heads per image seems to be the average, but larger families might be the norm in your area.
As you think about running every product you want to sell through this formula, I assume you’re in no mood to do somersaults. But I can tell you that when I learned this information, my business was at negative 6 percent profit, and I was burned out and frustrated.
As I went through the process of profitably pricing my products, I was amazed to see my business profitability changed overnight. In a very short time, I starting to feel like somersaulting because I had money left over after paying my bills, I had more time to spend with my family, and my hard work finally began to equal the reward I desired.
- the tastes, lifestyle, desires and needs of your ideal clients
- what the average amount of each sale needs to be
- the investment of your time it takes to the product
- how much time per week you can put into product production; for example, if your business model needs a $2,000 sales average and you want to work three days a week, offering wall portraits and groupings will hugely decrease your time spent in production, as opposed to offering multi-image albums.